What Happens if You Get a Stocks Margin Call?
A margin call occurs when a stocks trader's account free margin goes below the required margin level that is set by the broker. This means that because the free margin in the trader's account has gone below the required margin level then the trader gets a margin call and some of the open trades or all of the open trades in the trader's are closed by the broker until this margin level goes back up to above what is required margin level.
Some of the open trades might be closed out or all of the open trades may be closed if this margin call is automatically executed by the broker.
What is Stock Margin Requirement Level?
Now if Your Stocks Leverage is 100:1
When trading if you have $1,000 and use stocks leverage option of 100:1 & buy 1 standard lot for $100,000 your margin on this trade is $1000 dollars in your stocks account, this is money that you will lose if your open trade goes against you the other $99,000 that is borrowed, the broker will close the open stocks trade transactions automatically using a Stock Margin Call once your $1,000 has been taken by the stocks market.
But this is if your stocks broker has set 0% Stock Margin Requirement before closing your stock trades automatically using this Margin Call.
What is 20% Stock Margin Requirement Level?
For 20% margin requirement before closing your stock trades automatically using a Margin Call, then your transactions will be closed once your balance gets to $200 - at $200 you'll get a margin call.
What is 50% Stock Margin Requirement Level?
For 50% requirement of this level before closing your stock trades automatically using a margin call, then your transactions will be closed once your balance gets to $500 - at $500 you'll get a margin call.
What is 100% Stock Margin Requirement Level?
If the broker sets 100% trading margin requirement of this level before closing out your open trade positions automatically using what is referred to as a Margin Call - at $1,000 you'll get a margin call, then your stock trades will be closed once your balance gets to $1,000: Meaning the stock trades will close-out as soon as you execute a 1 standard lot on this stock account because even if you pay a 1 pips spreads your stocks account balance will get to $990 & the needed margin requirement percentage is 100% i.e. 1,000 dollars, therefore your stocks orders will immediately get closed using a Margin Call once your margin requirement falls below 100%.
Most stocks brokers don't set 100% margin requirement, but there are those stock brokers that set 100% trading margin requirement level are not suitable for you at all, even those stocks brokers that set 50% margin requirement level are still not suitable. Choose those brokers set their margin requirement at 20% margin requirement level, in fact, those brokers that set it at 20% Stock Margin Requirement are the best because the likely hood they close-out your trade using a Stock Margin Call is reduced as shown in the example above.
To Know More about Stock Leverage and Margin - How Do You Read the Topics Below:
Stock Leverage & Margin Discussed
